S&P Affirms Merit Life Insurance Co. 'AApi' Rating

Business Wire, Dec 19, 2000

Business Editors

NEW YORK--(BUSINESS WIRE)--S&P CreditWire

Dec. 19, 2000--Standard & Poor's today affirmed its double-'Api' financial strength rating on Merit Life Insurance Co. (Merit Life). The rating is based on the company's extremely strong capital and liquidity positions and solid operating results, partially offset by volatility in its premium revenues and somewhat aggressive investment profile.

Based in Evansville, Ind., Merit Life (NAIC: 65951) writes mainly credit life, credit accident and health, and individual life insurance marketed primarily through the consumer finance office network of its ultimate parent American General Corp. (counterparty credit rating double-'A'-minus), which conducts business under the name of the American General group of companies, a large diversified financial services group. Merit Life is a wholly owned subsidiary of American General Finance Corp. (counterparty credit rating single-'A'-plus). The company, which began operations in 1957, is licensed in 43 states, the District of Columbia, and the U.S. Virgin Islands.

Major Rating Factors:

-- Capital adequacy as measured by Standard & Poor's capital adequacy model is
more than 300%, which is extremely strong. Capital and surplus have grown at a
compound annual rate of 13.3% since 1991. Total adjusted capital was $416.6
million at year-end 1999 versus $381.2 million in 1998, a 9.3% increase.

-- Management has displayed an ability to achieve above average profitability,
as measured by the five-year average return on assets of 5.2%.

-- The company's liquidity ratio of more than 300% is extremely strong.

-- The company's investment risk profile is somewhat more aggressive than for
other companies at this rating level.

-- The company has a history of volatility in its premium revenues.

-- Although the company is a member of the American General group of companies,
the rating does not include additional credit for implied group support.

Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.

Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. -- CreditWire